APEC Small and Medium Enterprise (SME)
Sixth Ministerial Meeting

Christchurch, New Zealand, 26-28 April 1999

JOINT MINISTERIAL STATEMENT

Ministers with responsibility for Small and Medium Enterprises (SMEs) and businesses from around the APEC region met in Christchurch between 26 -28 April to discuss key issues affecting SME growth.

The Business Forum took place alongside the Ministerial on the first day. Ministers and business then met in joint session at the end of the first day and the second day. Both sides recognised the particular value of being able to meet together. There was a clear convergence of views about the key issues that needed to be addressed to promote SME growth. Ministers and business freely acknowledged their joint responsibilities to promote SME growth.

SMEs will be the engine of growth in the knowledge-based economies of the future. By their nature they are innovative, flexible and opportunity seeking. Any action taken by economies must have considerable regard to the needs of SMEs and the environment they must operate in. Faster growth by SMEs requires action across a wide range of policy areas, which demands a coordinated approach across the APEC work programme.

Ministers welcomed the APEC Secretariat's report on the attention being given to SME concerns in many other APEC fora and commended these efforts. Ministers welcomed also the report from the Chair of the APEC Policy Level Group on SMEs (PLG). We will be talking to our other APEC ministerial colleagues about the need to raise the profile of SME issues in their work programmes.

Ministers recognised the contribution that SMEs make to the participation of women and indigenous people in our economies.

Responding to the Regional Financial Crisis

The recent regional economic crisis has and is continuing to have profound effects on SMEs. SMEs have been particularly affected by a credit crunch.

Returning SMEs to growth is vital to the region's economic recovery. The business environment, however, is also rapidly changing. Corporations are divesting, leading to the creation of more SMEs. This further underscores the fact that SMEs will be the engine for growth in the future.

SMEs are looking for a competitive low cost environment that allows them to perform efficiently and effectively. To achieve these goals, Ministers agreed that APEC efforts need to focus on the strengthening of markets in the region. If SMEs are to contribute to the economic recovery and sustainable growth in the region, there is a need for economies to put in place open and transparent regulatory environments that are supportive of competitive markets, and to invest in the development of human capital.

As well as discussions on the regional financial crisis, Ministers and business considered ways to promote SME growth under four priority areas:

• enhancing management performance through education;
• reducing barriers to trade and compliance costs;
• improving capital markets and access to them;
• strengthening linkages to assist business within the region (e.g. the importance of electronic commerce).

Education

There are five education issues for SMEs. There is a need to:

• promote effective education-business linkages to support knowledge based enterprises;
• develop the capabilities of the current pool of managers;
• develop future SME managers;
• facilitate the transfer of skills between economies;
• develop skills for entrepreneurs and consumers to enhance consumer protection and confidence.

Strengthening the linkages between academia, research institutions and business ensures that the intellectual property being created in our research institutions can be best used by business. Research institutions need to understand and interact with SMEs. In turn, SMEs can benefit greatly through access to broader research and development capabilities.

It is crucial there is improved management education to help SMEs develop their capabilities through appropriate training programmes. In this context, Ministers endorsed the seminar for Management Capacity Building and the Workshop on Financing and Business Management. There is also a need to improve access for SME managers to a wider range of education programmes, drawing on expertise throughout the APEC region. This needs to include appropriate recognition of the needs of women and indigenous groups in the design and delivery of management education and training. Government programmes must meet SMEs' management requirements. In turn, business acknowledges that only through the process of continuous learning can they be exposed to new knowledge and ideas and better business practices.

Ministers would like to see SME-related work expanded in the Human Resources Development Working Group (HRD WG). In particular, efforts on the mutual recognition of qualifications across APEC economies needs to be fast tracked. Ministers call on their HRD Ministerial colleagues to accelerate their endeavours on these issues. The meeting also encouraged education providers to utilise the Global Information Network for SMEs developed by Japan.

The education system plays a critical role in shaping attitudes of entrepreneurship. In the wake of the impact that the regional economic crisis has had on SMEs, it is increasingly evident that businesses require individuals who are able to think independently and creatively to enhance the pool of future managers.

Ministers agreed to increase their efforts to develop an enterprise culture and to promote the integration of business skills through their school curricula. Ministers endorsed a proposal to enhance skills development for new entrepreneurs and to expand consumer confidence by undertaking an initiative on consumer education and protection. Ministers also noted the need for better Internet-based access to SME management training programmes, like Canada's Virtual University for SMEs (VUSME), and other tools designed to enhance SME management and financial performance, and enhancing access by SMEs to the technical knowledge and expertise that is in higher and vocational institutions.

Trade Barriers/Compliance Costs

As tariff barriers have been reduced, the emerging issues for business are now about non-tariff barriers, regulatory constraints, and high compliance costs. This next set of impediments will need to be a major focus for APEC in the future. They are particularly severe for SMEs, which suffer from a lack of information. This lack can be exacerbated by the complexity of regulations, uncertainty, lack of transparency and arbitrary decisions by officials.

There was strong view that member economies needed to give close attention to the identification and elimination of non-tariff measures. Ministers supported an intensified APEC effort in this area.

Non-tariff barriers represent "fixed costs" in international trade, which are disproportionately burdensome for SMEs. Ministers call on all APEC working fora to accelerate their trade facilitation work, in particular in the areas of standards harmonisation and alignment and customs efficiency, in order to bring these costs down.

We are not alone in focussing on these essential business facilitation issues. Indeed, APEC Leaders and Ministers in Kuala Lumpur called for enhancement and acceleration of APEC's trade facilitation work, and issued a challenge to APEC to present them with a substantial package of trade facilitation measures for consideration in Auckland later this year.

It is very important to embrace deregulation as a way to create more competitive markets. We need to improve the quality of regulation and reduce administrative and compliance costs, with particular emphasis on the needs of SMEs. This should be a central element in economies' on-going reform agendas.

Ministers agreed to identify, in consultation with SMEs, the major barriers and compliance costs to SMEs. Ministers agreed to report back directly on progress on these issues next year for later voluntary inclusion in IAPs. They directed the PLG to develop a methodology for these reports in conjunction with other APEC Committees and the APEC Secretariat. Ministers agreed that these reports should be made available on the Internet through the APEC Secretariat website.

Ministers agreed to two further initiatives to facilitate access by SMEs to information and advice on regulatory and administrative requirements.

Ministers directed the PLG to consider the feasibility of electronically linking existing and new SME related information services across APEC economies, noting that such services have already been established in most APEC economies and can provide information on general regulations and administrative requirements, as well as other information relevant to SMEs.

Ministers directed the PLG to undertake a feasibility study on linking economies data bases required by exporters on tariff, non tariff and other requirements. The objective is to make information available through a single entry point in a form that is SME-friendly.

Ministers also agreed on the need to facilitate the involvement of private enterprise in the provision of a robust and efficient infrastructure (e.g. telecommunications) that meets the needs of SMEs.

Ministers acknowledged that other key issues for SMEs include:

• overcoming the costs associated with different technical and administrative standards e.g. through mutual recognition arrangements;
• protection of property rights and facilitation of processes to register patents;
• the enforcement of contracts to improve the certainty of doing business in the APEC region;
• facilitating business mobility through improved visa arrangements.

Capital Markets

Access to capital is critical for SME growth. Ministers recognised the difficulties for SMEs in raising capital are multi-faceted:

• risk averse banking & finance sectors;
• lack of venture capital (in some economies);
• many SMEs lack the management skills to attract investors;
• lack of transparency in the operation of capital markets (in some economies).

There was broad agreement that the private sector is the most efficient and effective provider of finance and related services to SMEs. All economies should strive to develop efficient capital markets based on international best practice for banking and securities market regulation. Ministers agreed to raise with APEC Finance Ministers the urgency of removing barriers to the competitive provision of financial services to SMEs, especially with respect to the marshalling of capital and the creation of venture capital funds.

Recognising private sector concerns, Ministers are also committed to advance, with APEC Finance Ministers, international best practice in the areas of:

• transparency;
• sound monetary and fiscal policy;
• good corporate governance;
• financial reporting and accounting standards.

Business acknowledged that they have a prime responsibility to improve their governance and financial reporting standards also.

Ministers endorsed the Workshop for APEC SME Financing and Business Management referred to it from the PLG.

Ministers directed the PLG to convene a group of experts to consider the various experiences of member economies with venture capital programmes to support new and existing SMEs, including focusing on any impediments to international movement of venture capital among APEC economies.

Business called for clear and transparent tax systems that do not distort investment decisions and do not tax their earnings more than once.

Enhancing Business Linkages

Ministers recognised the critical importance of electronic commerce to SME growth in the rapidly changing global environment. We welcomed the Blueprint on Electronic Commerce that was adopted by APEC Leaders at Kuala Lumpur which addresses cross border issues, security issues and IP protection for electronic commerce. Business reiterated their concern to see minimal regulation in this area and urged quick action by economies in implementing the Blueprint. Ministers informed business of the steps being taken to provide information on the Website on regulatory systems of individual APEC members on the Internet (e.g. through APEC E-com Legal Guide at www.bakerinfo.com/apec/) and the various activities undertaken by APEC fora (eg "Helping Your Business Grow - Guide for SMEs in the APEC region").

Ministers directed the APEC Secretariat to continue to update its information sites on a regular basis.

Ministers endorsed the following new initiatives to develop electronic commerce and linkages:

• APEC Business Matching and Advice. This initiative will provide a place where SMEs can directly register on the internet and advertise the kinds of linkages they are seeking with other SMEs;
• Workshop on Electronic Commerce. This initiative will aim to identify impediments to the more rapid adoption of electronic commerce.

Ministers noted also that Malaysia has taken the initiative to produce an update of the Guide for SMEs in the APEC region, and that this is available via the Internet. Ministers requested that this Guide be updated in 1999.

Ministers further recognised the importance of official institutions acting as role models in promoting awareness and acceptance of electronic commerce by ensuring that their own activities make use of electronic commerce as fully as possible.

Business acknowledged that the business sector itself should continue to lead and facilitate the development of electronic commerce and linkages between SMEs.

Y2K

Ministers underscored the critical importance of Y2K. They welcomed the conclusions and recommendations on the impact of Y2K on SMEs transmitted to them from the APEC Symposium on Y2K issues held in Singapore last week. They also welcomed the holding of an APEC Y2K Week which was coordinated by Japan. Efforts on readiness work, testing and contingency planning should be strengthened in the months ahead.

APEC Business Advisory Council (ABAC)

We welcomed the important contribution that ABAC is making in putting the business view forward to Leaders. We urge that there is a continuing presence of SME representation on ABAC.

Conclusion

Recognising the critical role that SMEs will play in the economic recovery of the region, Ministers expressed their strong desire to communicate the outcomes of their discussions over these last two days to their APEC Ministerial colleagues. They directed officials to advance SME interests in all aspects of the APEC work agenda.

Ministers welcomed the invitation to meet again in June 2000 in Brunei Darussalam.